A development team led by two women, including one local land-use official, bested a decades-old affordable housing firm in the behind-the-scenes real estate competition to convert San Diego’s 101 Ash St. office tower into hundreds of subsidized apartments.
On Monday, San Diego City Councilmembers voted in closed session to select Create Dev LLC and MRK Partners Inc. to remake the asbestos-ridden building and civic blunder into a downtown housing success story.
The decision means the entities will begin more formally negotiating a deal that could eventually see San Diego shed the financial weight of an unoccupied property that continues to vex the city.
“Today, after a briefing on two well-vetted proposals to redevelop the city-owned building at 101 Ash St., the City Council directed staff to enter into exclusive negotiations with Create Dev LLC and MRK Partners on their proposal to create 253 affordable homes with ground-floor retail at the site,” San Diego Mayor Todd Gloria said in a statement. “City staff will brief the council regularly as negotiations progress over the next number of months.”
Create-MRK beat out rival Affirmed Housing with a bid proposing 250 residential units deed restricted for people earning between 30% and 80% of the area median income. The area median income for a family of four in San Diego County is $119,500.
The plan also calls for 25,000 square feet of first-floor storefronts and a 4,000 square-foot childcare facility.
Create is a one-woman shop, run by San Diego Planning Commissioner Kelly Modén, that specializes in multifamily housing. Los Angeles-based MRK is a privately held real estate investment company solely focused on affordable housing development, including hotel- and motel-to-residential conversion projects. The company was started by President Sydne Garchik in 2015.
The partners have collaborated on several projects, including the Vista Woods Apartments project in Pinole. The project in Northern California was a ground-up construction project and includes 179 affordable units for seniors.
“We are thrilled and ready to get to work,” Modén said in a statement. “Our redevelopment of 101 Ash will provide more than beautiful, affordable housing to San Diego working families — it will also activate a community. We look forward to working with the city on next steps, and to sharing more about this project that delivers unparalleled benefits to the city and the broader San Diego community.”
The team includes Gensler as the project architect and Swinerton as the general contractor. Non-profit SAY San Diego, which operates before- and after-school programs at many San Diego schools, has agreed to run the childcare facility.
Although the women-led team has less experience than Affirmed Housing, which was founded in 1992, Create-MRK may have won favor with council members by promising a substantial number of two- and three-bedroom units, which can accommodate families. In an interview with the Union-Tribune last week, Modén said that more than half of the project’s residential units will be for families.
In addition, the development team said it will seek to give income-qualified city staffers and other civic workers first dibs on a portion of the units.
Proposed deal terms, such as whether the transaction would be an outright land purchase or a joint ownership promising shared revenue, likely factored into council members’ decision. Also key is a developer’s ability to compete for, and secure, funds from a finite pool of affordable housing subsidies.
Affordable housing is a specific product type that relies heavily on a combination of local, state and federal subsidies. The product type is regulated by government agencies, which dole out low-income housing tax credits and housing vouchers to ensure that developers can rent units to income-qualified households for below-market rates. Rental rates are set by the U.S. Department of Housing and Urban Development each year and are specific to each renter’s family size and annual income.
Both teams have declined to publicly disclose proposed deal terms or specifics on financing plans.
Last week, Affirmed Housing President Jimmy Silverwood suggested that his team’s proposal would pay the city $86 million over 40 years. Modén hinted that the city could retain ownership of the building under one option in the Create-MRK proposal, allowing it to collect rental revenue in “perpetuity.”
The competing bid from Affirmed Housing included 263 residential units deed restricted for people earning between 30% and 70% of the area median income, and a 30,000-square-foot childcare facility on the first floor. The team includes HA Builder Group as its general contractor, and two architects, Carrier Johnson + Culture and Basis Architecture and Consulting.
“While we are disappointed that our proposal was not selected, Affirmed Housing remains committed to our mission of providing successful, sustainable, high-quality affordable housing as we have for over 30 years,” the company said in a statement.
Built in 1967, the 21-story office tower at 101 Ash St. has been mostly vacant since mid-2015, when Sempra Energy moved out. In early 2017, the city entered into a 20-year, lease-to-own agreement with Cisterra Development, expecting to house a portion of its downtown workforce in the 314,544 square-foot building.
That plan was aborted after a larger-than-anticipated remodel resulted in asbestos contamination and other issues. In 2022, the city bought out the lease for $86 million in a controversial settlement agreement.
The building, which remains empty, requires regular upkeep and security, costing the city millions each year.
